A recent settlement between the US Department of Labor and First Republic Bank aptly illustrates the perils of misclassifying large numbers of employees under the overtime laws.
Following a DOL Investigation, First Republic agreed to pay just over $1 million to nearly 400 of the Bank’s employees in 5 states (approximately 25% of the total number of employees First Republic has in those 5 states) including New York and Connecticut. The Bank treated these employees as exempt from the overtime pay regulations and did not pay them time and a half their regular hourly rate when they worked over 40 hours in a workweek. Operating under the assumption that the employees were exempt, the Bank also did not track their work hours, thereby violating the FLSA’s recordkeeping requirements. The misclassified employees were also paid bonuses which the DOL determined should have been factored into the employees’ regular hourly rates thereby increasing the amount of overtime pay the incorrectly classified employees were found to be owed.
The root problem in this situation was the bank’s failure to carefully analyze these employees’ job duties in making an informed assessment of their status under the overtime laws. According to Secretary of Labor Hilda Solis, “It is essential that employers take the time to carefully assess the FLSA classification of their workforce. As this investigation demonstrates, improper classification results in improper wages and causes workers real economic harm.” Large and medium-sizes businesses in particular would be wise to heed the Secretary of Labor’s admonition.